Three cheers for higher-than-sky-high gasoline prices, but they really are now likely to decline

Last week I had expected that the wild speculation in retail gasoline futures would abate to some degree, but it only increased.  That's the way it is with speculative bubbles, like the one we are in for a wide range of commodities. Even as we get closer to the "top", the spikes can become even sharper.

I remain a big fan of higher gasoline prices since they are a great economic signal to direct consumers to switch to more fuel-efficient transportation and to otherwise reduce their consumption of gasoline, as well as to incentivize development of alternative fuels.

That said, I strongly suspect that the recent run-up of gasoline prices has mostly run its course and we could see a decline over the next couple of months as speculators who had fueled the recent steep rise take profits and look for some other commodity price to manipulate.

Incidentally, here are the gasoline futures prices for the rest of the year as of the close on Friday:

• May 2007: $2.3613
• June 2007: $2.2598
• July 2007: $2.2108
• August 2007: $2.1708
• September 2007: $2.1188
• October 2007: $1.9743
• November 2007: $1.9098
• December 2007: $1.8773

As you can see, even the speculators are speculating that prices will decline, with a 10-cent decline over the next month and a 48-cent decline by the end of the year. Be aware that these number are subject to radical and frequent change on a monthly, weekly, and even a daily basis.

-- Jack Krupansky